Global oil markets suffered its worst performance in five years and a half, in light of the sharp drop in oil prices by 44% below $60 a barrel since June.

Stock markets began to drop since last June due to a decline in global demand and oversupply, which extended the pressure on prices and pushed it further to the downside.

Market share battle

The global battle for oil market share formed a negative factor on prices, as Saudi Arabia, the largest oil exporter, refused to cut production in the face of surging U.S. shale output and tempered global demand.

Accordingly, Saudi Arabia lowered prices to customers in Asia and the United States to influence the U.S. shale oil companies.

EIA cuts oil demand

Amid the continued drop in oil prices, the Energy Information Administration (EIA) announced reducing the global demand growth forecasts for oil in October 2014 to its lowest level in five years, contributing to the negative pressure on oil.

OPEC meeting in November

Prices continued falling till the meeting of the Organization of Petroleum Exporting Countries (OPEC) meeting that was held in November 27 in Vienna. OPEC installed production ceiling at 30 million barrel a day, despite the significant drop in prices below $100 a barrel.

OPEC members supported the decision to install production ceiling and stated that OPEC is not responsible for the fall in prices and blamed producers out of OPEC, mainly Russia and Iran.

Output ceiling not to be raised

Amid conflicting speculations about OPEC and Saudi Arabia’s oil policy, Saudi Arabia Oil Minister Ali Al-Naimi said that OPEC will not resort to cut production even if prices tumbled to $20 a barrel.

Most OPEC members agreed with the oil minister, saying that there is no urgent need to reduce output, a theory that UAE Oil Minister Suhail Al Mazroui agreed on. The most important statements of Al Mazroui were that OPEC will not cut output even if crude prices fell to $40 a barrel.

Russia and Iran

In light of the continued global battle on market share, and the intense competition in oil markets, both Russia and Iran reportedly accused Saudi Arabia and the U.S. that the decline in prices is a product of a political conspiracy to affect Russia in particular, which was exiled by Saudi Oil Minister Ali Al-Naimi immediately afterwards.

U.S. crude oil prices began 2014 at $98,50 a barrel and recorded the highest level at the beginning of June at $102 a barrel. Prices then dropped to its lowest level $52,72 a barrel in December. The contract was down about 50% for the year.

As for Brent oil, prices recorded its highest around $112 a barrel, compared to the lowest levels recorded in January 30 at $56,33 a barrel. The contact was down about 48% for the year.

Outlook

Most expectations indicate that oil prices could see moderation in the beginning of the second half of 2015, which was affirmed by the Secretary General of OPEC Abdullah Al-Badri through expressing hope of price recovery.

These expectations correspond to OPEC forecasts itself, which see improvement in prices in the second half of 2015, and market consolidation in the end.